Insurance

Protecting Your Property and Your Corporation

Insurance is one of the most important responsibilities for any body corporate. Getting it wrong — or letting it slide — can have serious financial consequences for every owner in the group.

This guide covers residential insurance for strata titled groups and strata division community titled groups (where one lot sits above another). We'll refer to both as body corporates throughout.

The Legal Requirement

Body corporates are required by law to maintain sufficient insurance to cover the full replacement of all common property. This isn't optional — it's a legislative obligation under both the Strata Titles Act and the Community Titles Act.

Understanding Common Property Boundaries

The Acts define common property boundaries as follows:

• Walls and fences — the boundary is the inner surface
• Floors — the boundary is the upper surface
• Ceilings and roofs — the boundary is the under surface

In practice, common property includes the building structure (walls, floors, roof), boundary fences between units, roads, electrical and water supply infrastructure, sewer lines, and the interior of units including the owner's walls. Fixtures and fittings inside units — kitchen cabinets, tapware, benches, fixed air conditioning — are generally considered part of the building.

What's Typically Covered

Standard body corporate insurance policies cover prescribed events including fire, explosion, lightning, earthquake, theft and attempted theft, deliberate or intentional acts, burst or leaking pipes and fixed apparatus, and vehicle impact (including aircraft and watercraft).

Improvements Must Be Insured

If the corporation or individual owners make improvements — whether that's a new BBQ area on common property, a pergola, or a kitchen renovation inside a unit — these need to be reflected in the insurance. Owners should notify the corporation of any substantial works in their units, and the corporation needs to keep the insurer informed of changes to common property or individual lots.

Getting the Replacement Value Right

Replacement value isn't the same as market value. It needs to account for the full cost of rebuilding, including demolition, council approvals, engineering, and associated professional fees. Land value is excluded — this is purely about what it would cost to knock down and rebuild.

Don't rely on the annual increase your insurer suggests. That's a rough adjustment, not a substitute for a proper valuation.

Other Required Cover

South Australian legislation requires body corporates to hold:

• Public liability — minimum $10 million
• Fidelity insurance — minimum $50,000 (covers theft of corporation funds; groups with no funds are exempt)

What Body Corporate Insurance Doesn't Cover

• Personal contents belonging to owners or tenants
• Personal injury while inside a unit
• Certain exclusions that vary by policy — check yours for specifics around things like landslip or flood

Every owner and tenant should have their own contents insurance and personal liability cover. Don't assume the body corporate policy has you covered for everything.

Valuations — Best Practice

Get a professional replacement valuation at least every five years. If your group decides against it, make sure that decision is recorded in the meeting minutes — including who voted for and against. This protects those who advocated for the valuation if the group later turns out to be underinsured.

If a group is knowingly under-insured and has voted down a valuation, those who voted against have effectively accepted the liability. In that situation, seeking legal advice and putting the group on formal notice may be appropriate.

Insurance Checklist

Work through this with your fellow owners to make sure the group's coverage is fit for purpose.

Valuations

When was the last time a qualified valuer assessed the property? Remember that the council valuation estimates the sale price of the unit — it has nothing to do with what it would cost to demolish and rebuild.

Cover Types to Review

• Building and common property — Does the policy cover all buildings and improvements for strata titles and strata division groups?
• Public liability — Does the group have at least $10 million of cover over all common property? If someone is injured on common property due to poor maintenance (a damaged stairway, for example), the corporation can be sued.
• Fidelity — Is the group covered for theft of corporation funds? The SA minimum is $50,000.

Safety and Risk

• Has the property had a fire safety inspection in the last 12 months?
• If the building includes aluminium composite panels, has that been assessed?
• Does the property comply with window safety requirements?
• Are there any risk mitigation measures in place (sprinkler systems, fire management plans, annual hazard inspections) that could improve your premium?

Office Bearers Insurance

Does the group have cover for its officers? This protects committee members and other volunteers if they're sued in connection with their roles. Raise this at your next general meeting if it's not already in place.

Contents and Landlords' Insurance

The body corporate policy covers the building and shared property — not personal belongings or rental income.

• Owner-occupiers — Consider a separate contents policy for your personal possessions.
• Landlords — Consider landlords' insurance, which can cover loss of rent, tenant default, legal expenses, and public liability.

Annual Review

Even between formal valuations, review the sum insured each year to make sure it keeps pace with rising construction and repair costs.